2019 ETHANOL INDUSTRY OUTLOOK - Renewable Fuels Association
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2019 ETHANOL INDUSTRY OUTLOOK
RFA Board of Directors
Neil Koehler Absolute Energy LLC E Energy Adams LLC Mid-Missouri Energy LLC
RFA Chairman Rick Schwarck Carl Sitzmann Chris Wilson
www.absenergy.org www.eenergyadams.com www.midmissourienergy.com
Pacific Ethanol Inc.
www.pacificethanol.net Ace Ethanol LLC East Kansas Agri-Energy LLC New Energy Blue LLC *
Neal Kemmet Bill Pracht Thomas Corle
www.aceethanol.com www.ekaellc.com www.newenergyblue.com
Jeanne McCaherty
Adkins Energy LLC ELEMENT LLC * Parallel Products
RFA Vice Chair Ray Baker Jason Friedberg Bob Pasma
Guardian Energy LLC www.adkinsenergy.com www.elementbiofuels.com www.parallelproducts.com
www.guardiannrg.com Al-Corn Clean Fuel LLC Golden Grain Energy LLC Quad County Corn Processors
Randall Doyal Jim Boeding Coop.
www.al-corn.com www.ggecorn.com Delayne Johnson
Charles Wilson
www.quad-county.com
RFA Treasurer Badger State Ethanol LLC Grain Processing Corp.
Erik Huschitt Mark Ricketts Redfield Energy LLC
Trenton Agri Products LLC
www.badgerstateethanol.com www.grainprocessing.com Dana Lewis
www.trentonagriproducts.com www.redfieldenergy.com
Big River Resources West Granite Falls Energy LLC
Burlington LLC Steve Christensen Ringneck Energy & Feed LLC*
Geoff Cooper Raymond Defenbaugh www.granitefallsenergy.com Walter Wendland
RFA President & CEO www.bigriverresources.com www.ringneckenergy.com
Heartland Corn Products
Renewable Fuels Association Bushmills Ethanol Inc. Gary Anderson Show Me Ethanol LLC
www.EthanolRFA.org Erik Osmon Richard Hanson
Highwater Ethanol LLC
www.bushmillsethanol.com www.showmeethanolllc.com
Brian Kletscher
Butamax Advanced Biofuels LLC www.highwaterethanol.com Siouxland Ethanol LLC
Matthew Viergutz Pam Miller
Homeland Energy Solutions LLC
www.butamax.com www.siouxlandethanol.com
Pat Boyle
Central Indiana Ethanol LLC www.homelandenergysolutions.com Southwest Iowa Renewable
Ryan Drook Energy LLC
Husker Ag LLC
www.cie.us Mike Jerke
Seth Harder
www.sireethanol.com
Chippewa Valley Ethanol Co. www.huskerag.com
Chad Friese The Andersons Inc.
Ingredion Inc.
www.cvec.com Mike Irmen
Kevin Keiser
www.andersonsethanol.com
CHS Inc. www.ingredion.com
Steve Markham West Coast Waste*
KAAPA Ethanol Holdings LLC
www.chsinc.com Dennis Balakian
Chuck Woodside
www.westcoastwaste.com
Commonwealth Agri-Energy LLC www.kaapaethanol.com
Mick Henderson Western New York Energy LLC
Lincolnland Agri-Energy LLC
www.commonwealthagrienergy.com Tim Winters
Eric Mosbey
www.wnyenergy.com
Corn Plus www.lincolnlandagrienergy.com
www.cornplus.com Western Plains Energy LLC
Little Sioux Corn Processors LLC
Derek Peine
Dakota Ethanol LLC Steve Roe
www.wpellc.com
Scott Mundt www.littlesiouxcornprocessors.com
www.dakotaethanol.com White Energy, Inc.–Hereford
Merrick & Co.
Greg Thompson
Didion Ethanol LLC John Kosanovich
www.merrick.com www.white-energy.com
John Didion
www.didionmilling.com
* Prospective Producer Member
2 RENEWABLE FUELS ASSOCIATION
At first glance, the theme of this year’s Annual Industry Outlook, “Powered with
Renewed Energy,” might seem a safe and obvious choice. After all, biofuels like eth-
anol are, by nature, the epitome of renewed energy. As winter’s cold and bleakness
give way to the warmth and rejuvenation of spring, farmers enter their fields to sow
a new crop. And after collecting and storing the sun’s bountiful energy throughout
the growing season, those crops are harvested and transformed into the clean fuels
that power our nation and world. This natural rhythm renews and repeats itself each
and every year.
However, this year’s theme goes far beyond its literal underpinnings. Indeed, the
Renewable Fuels Association (RFA)—and the ethanol industry itself—are experienc-
ing renewal and remarkable change as well.
After 17 years at the helm of RFA, my friend and mentor Bob Dinneen has assumed a new role as Senior Stra-
tegic Advisor. Once described by the Wall Street Journal as “indefatigable” and the “ethanol lobby’s old reliable,”
Bob has undoubtedly left an indelible mark on our industry. And he’ll continue to provide guidance and counsel
as we navigate an uncertain future.
But just as the best stories ever written have many chapters, the RFA is turning the page and entering an excit-
ing new era. I was thrilled and humbled to assume the role as RFA’s President and CEO in late 2018, and I am
beyond excited to bring new energy, passion, and ideas to the association and the industry at large.
Make no mistake, our challenges are legion. Antiquated regulatory hurdles, attacks on the Renewable Fuel
Standard, protectionist trade barriers, and a constant barrage of myths and misinformation are undermining
domestic and global demand for our products. It is easy to become discouraged.
But our opportunities are boundless. Ethanol remains the highest-octane, lowest-cost motor fuel on the planet.
And it is the only tool available at scale in the near term to significantly reduce carbon emissions from gaso-
line. Meanwhile, the industry’s co-products—including distillers grains and distillers oil—provide indispensable
protein and energy to a hungry world.
The world wants and needs your products! And when given a true choice, consumers will choose affordability,
efficiency, security, and renewability every time.
It is our hope that the facts, figures, and data presented in this year’s Outlook not only help you prepare for the
challenges and opportunities ahead in 2019, but also that they renew your energy and passion for our extraor-
dinary industry.
Sincerely,
Geoff Cooper, President & CEO
2019 ETHANOL INDUSTRY OUTLOOK 1
2018 ETHANOL INDUSTRY OVERVIEW
Powering Forward
D
espite strong headwinds, the U.S. ethanol industry pow- Not surprisingly, such a dramatic drop in demand caused an equal-
ered forward in 2018, breaking records in production, ly stark impact on ethanol prices and ethanol industry profitability.
total consumption, and exports. Ethanol prices fell to a 13-year low as the market responded to
preserve some semblance of market share. Reduced demand also
The nation’s 210 ethanol plants located across 27 states produced
impacted farmers, who lost a large portion of their single most
an astounding 16.1 billion gallons of clean-burning renewable
important value-added market for corn. Net farm income fell to its
ethanol. Total consumption rose to a record 16.2 billion gallons,
lowest level in a decade. Refiners benefitted. Average monthly U.S.
300 million gallons more than a year ago, driven largely by record
refiner cash operating margins rose steadily throughout the year as
exports of over 1.6 billion gallons as global octane demand contin-
ethanol stocks rose and RFS credit prices cratered.
ues to grow.
Still, there are more optimistic signs on the horizon. President
Domestic demand also seemed destined for record levels as January
Trump has promised EPA will promulgate a rule allowing the year-
blend rates topped a record 10.75%, shattering the so-called blend
round use of E15 before the summer of 2019, trade markets are
wall. But as word of EPA’s indiscriminate use of small refinery
expected to grow even more as uncertainty over various trade agree-
exemptions from the federal Renewable Fuel Standard (RFS)
ments dissipates and octane demand globally continues to soar, and
spread, domestic usage fell precipitously, hitting a four-year low of
a renewed interest in low carbon fuels portends increased demand
just 9.54% in April.
for renewable fuels here and abroad. Production from newly con-
structed plants and completed expansions will be available to meet
new demand and provide a beacon of hope for a brighter future.
Historic U.S. Fuel Ethanol Production
U.S. Fuel Ethanol Biorefineries by State Historic U.S. Fuel Ethanol Production
18,000
16,100
WA ME
MT ND VT
18,000
NH 16,100 16,000
MN
ID WI MA
OR MI
SD NY CT
WY RI
16,000 14,000
PA NJ
NE OH
MD
NV IA DC
DE
UT CO
IL IN WV 14,000 12,000
VA
MO KY
CA KS NC
TN
Million Gallons
AZ AR SC 12,000 10,000
NM OK
GA
MS
Million Gallons
AL
LA 10,000 8,000
TX
FL
Installed Ethanol Biorefinery 8,000 6,000
New Biorefinery Under Construction*
*Excludes expansion projects
6,000 4,000
4,000 2,000
175
2,000 0
175
2018*
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
0
Source: RFA and U.S. Energy Information Administration *Estimated
2018*
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2 RENEWABLE FUELS ASSOCIATION
U.S. Ethanol Production Capacity by State Production Facilities
(Million Gallons per Year)
Existing Operating Under Total Installed Operating Biorefineries
Production Production Construction/ Capacity Ethanol Ethanol Under Constr./
Capacity Expansion Biorefineries Biorefineries Expansion
Iowa* 4,328 4,278 30 4,358 44 44 1
Nebraska 2,239 2,186 - 2,239 26 24 -
Illinois 1,787 1,687 - 1,787 14 14 -
Minnesota 1,297 1,257 35 1,332 22 20 1
Indiana 1,198 1,198 80 1,278 14 14 1
South Dakota 1,080 1,080 80 1,160 15 15 1
Ohio 630 630 - 630 7 7 -
Wisconsin 585 585 4 589 9 9 1
Kansas 516 491 70 586 12 11 1
North Dakota 470 470 51 521 5 5 2
Texas 385 345 - 385 4 3 -
Michigan 355 355 - 355 5 5 -
Missouri 276 261 - 276 6 6 -
Tennessee 225 225 - 225 2 2 -
California 223 218 - 223 6 5 -
Oregon 162 42 - 162 3 2 -
New York 150 150 - 150 2 2 -
Colorado 125 125 - 125 4 4 -
Georgia 120 120 - 120 1 1 -
Pennsylvania 110 110 - 110 1 1 -
Idaho 60 60 - 60 1 1 -
North Carolina 60 - - 60 1 - -
Arizona 50 50 - 50 1 1 -
Kentucky 48 48 - 48 2 2 1
Wyoming 10 - - 10 1 - -
Florida 8 - - 8 1 - -
Virginia 4 4 - 4 1 1 -
TOTAL U.S. 16,501 15,975 350 16,851 210 199 9
Source: RFA, as of January, 2019 *Data includes 2 operating plants with unknown or undisclosed production volumes.
Historical Biorefinery Count and Production Capacity
Installed Ethanol Total Installed Average Capacity
Biorefineries Production Capacity per Biorefinery
(mgy) (mgy)
1998 56 1,784 31.9
2003 72 3,101 43.1
2008 170 10,569 62.2
2013 210 14,880 70.9
2018 210 16,501 78.6
Source: RFA * As of December for each year specified
2019 ETHANOL INDUSTRY OUTLOOK 3
Renewing the Rural Economy
W
hile the broader rural economy participated in In 2018, the ethanol industry directly employed 71,367 American
national growth trends following passage of the workers, and it supported an additional 294,516 indirect and in-
Tax Cuts and Jobs Act in December 2017, the duced jobs across all sectors of the economy. The industry created
agriculture sector continued to struggle in 2018. The crop sector $25 billion in household income and contributed $46 billion
endured its sixth consecutive year of reduced cash receipts, as a to the national Gross Domestic Product (GDP). Moreover, the
trade dispute with China hit soybean producers particularly hard. ethanol industry generated nearly $10 billion in federal, state and
Additionally, growers felt the effects of rising interest rates, as farm local taxes, and spent over $26 billion on raw materials, inputs,
debt reached levels one-third higher than early in the decade. and other goods and services.
According to Creighton University, farmland prices and farm Consistent with the ethanol industry’s role of contributing to
equipment sales continued to be weak spots in the rural economy, America’s energy independence, almost one-quarter of the people
and a survey for its Rural Mainstreet Index found, “Approximately employed by the industry are veterans of the U.S. military – nearly
one-fifth of bank CEOs expect low farm income and falling farm- four times the rate of the U.S. workforce as a whole.
land prices to present the greatest challenge to banking operations
With new ethanol facilities starting up production and existing fa-
over the next 5 years.”
cilities expanding, the industry will continue to provide additional
While the ethanol industry also was affected by the trade dispute employment opportunities and add value to farm products.
with China, the export market overall remained a bright spot and
production reached a record 16.1 billion gallons. The industry
provided a critically important market for corn and sorghum
producers and bolstered rural incomes.
Ethanol’s Value-Added Proposition
Based on average prices and product yields in In 2018, the production of 16.1 billion
2018, a typical dry mill ethanol plant was adding gallons of ethanol and 43 million metric
nearly $2 of additional value—or 55%—to every tons of co-products and distillers oil had
bushel of corn processed. substantial economic impacts, including:
• 71,367 direct jobs
VALUE OF OUTPUTS
CORN PER BUSHEL • 294,516 indirect and induced jobs
COST Ethanol $3.84 • $46 billion contribution to GDP
PER
BUSHEL Distillers Grains $1.16 • $25 billion in household income
Corn Distillers Oil $0.19
$3.35 • $10 billion in tax revenue
TOTAL $5.19
4 RENEWABLE FUELS ASSOCIATION
Gross Value of U.S. Ethanol Industry Output
Ethanol Co-products
$45,000
$40,000
$7.691
$35,000 $22,089
$30,000
Million Dollars
$25,000
$20,000
$15,000
$10,000
$5,000
$0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018*
Source: RFA based on U.S. Dept. of Agriculture data * Estimated
Ethanol Industry Petroleum National Workforce
Fuels Industry (All Industries)
ETHANOL 30% 26%
47%
INDUSTRY
GENDER
70% 53%
Female 74%
Male
WORKFORCE 55 AND
29% 24% 23%
DEMOGRAPHICS OVER
UNIONIZED 9% 2% 11%
MILITARY
VETERANS 23% 11% 6%
Sources: National Association of State Energy Officials and Energy Futures Initiative
2019 ETHANOL INDUSTRY OUTLOOK 5
Energizing Global Markets
T
he United States ethanol industry is a global powerhouse, Meanwhile, U.S. ethanol imports pressed below the 100-mil-
leading the world in supply and demand. With 16.1 bil- lion-gallon mark for the fifth year in a row. Brazil shipped 60
lion gallons in 2018 output, the United States produced million gallons of sugarcane ethanol—roughly 20 percent less
double the volume generated by Brazil—the world’s second largest than last year, taking advantage of the favorable treatment under
producer. Ethanol blending for transportation use continued the California Low Carbon Fuel Standard (LCFS) and RFS.
to outpace the rest of the globe. Meanwhile exports swelled 20
New opportunities within the global market are on the horizon in
percent to a new record high of over 1.6 billion gallons, finding a
2019. A new Japanese biofuel policy allows U.S. corn ethanol to
home for roughly 10% of American ethanol production in 2018.
meet up to 44 percent of the estimated ethanol required to make
Brazil and Canada remained our top customers for the fourth ETBE. This updates Japan’s existing sustainability policy in which
straight year, accounting for half of all U.S. ethanol exports. How- only sugarcane ethanol was eligible for import and production of
ever, Brazilian trade barriers caused U.S. ethanol shipments to the oxygenate.
vacillate significantly throughout the year following a peak draw
RFA continues to watch the unfolding of the implementation
in February. In addition, increased protectionist policies by China
of Brazil’s RenovaBio, a new national biofuels policy approved
and a continuation of European Union barriers combined to shift
in December 2017. This policy will likely encourage significant
the U.S. trading landscape further. As a result, U.S. shipments
growth in biofuels consumption in the country. In 2019, RFA will
also were dispersed to several smaller and mid-sized markets like
be collaborating closely with the Brazilian government to establish
India, South Korea, and the Philippines. As a result, U.S. ship-
a fair trading platform. The primary focus will be to ensure the
ments also were dispersed to several smaller markets like India,
carbon intensity scoring of biofuel pathways under the program is
South Korea, the Netherlands, and the Philippines.
transparent and science-based. If done correctly, RenovaBio could
provide substantial U.S. ethanol export opportunities.
U.S. Ethanol Exports and Imports
Exports Imports Net Exports
1,800
1,600
1,400
1,200
Million Gallons
1,000
800
600
400
200
0
200
400
600
800
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018*
Sources: U.S. Dept. of Commerce, U.S. Census Bureau, Foreign Trade Statistics
*2018 estimated based on Jan.-Sep. 2018
6 RENEWABLE FUELS ASSOCIATION
Top Destinations for U.S. Ethanol Exports in 2018
Canada
21%
Netherlands
5%
South
Korea
China
5%
4%
United
Arab
Emirates
4% India
7% Philippines
4%
Colombia
3%
Brazil
30%
Peru
3% REST OF
WORLD
14%
Sources: U.S. Dept. of Commerce, U.S. Census Bureau, Foreign Trade Statistics
*Based on Jan.-Sep. 2018
2018 Global Fuel Ethanol Production by Country
(Country, million gallons, share of global production)
“The President promised to have the back of
every American farmer and rancher, and he
knows the importance of keeping our rural
Brazil; 7,950; 28% economy strong. Unfortunately, America’s
European Union; 1,430; 5%
hard-working agricultural producers have
China; 1,180; 4% been treated unfairly by China’s illegal trading
Canada; 480; 2% practices and have taken a disproportionate
Thailand; 390; 1% hit when it comes to illegal retaliatory tariffs.
India; 330; 1% USDA will not stand by while our hard-working
United States; 16,100; 56%
Argentina; 290; 1% agricultural producers bear the brunt of
unfriendly tariffs enacted by foreign nations.”
Rest of World; 550; 2%
USDA Sec. Sonny Perdue
Source: RFA analysis of public and private data sources
2019 ETHANOL INDUSTRY OUTLOOK 7
Powerful Nutrition
C
onsistent with record ethanol production, the U.S. industry A GLOBAL DYNAMO
generated a record 41.3 million metric tons (mmt) of dis-
U.S. biorefineries satisfied growing domestic feed needs while also
tillers grains (DDGS), gluten feed, and gluten meal. These
exporting nearly one out of every three tons of distillers grains. A
ingredients are mixed into rations for beef and dairy cattle, swine,
geographically diverse set of markets on five continents jockeyed to
poultry, and even fish. The industry also produced 4 billion pounds
purchase the 12.1 mmt of exported U.S. DDGS in 2018. For the
of corn distillers oil, used as a feed ingredient or biodiesel feedstock.
second straight year, Mexico was the top market as close to a fifth
Now fully under the regulatory oversight of the U.S. Food & of all shipments headed south of the border. South Korea, Turkey,
Drug Administration, ethanol plants are required to comply with Vietnam, and Thailand were other top markets in 2018.
preventive controls requirements as mandated by the Food Safety
Unfortunately, protectionist trade barriers also affected distillers
Modernization Act (FSMA). This federal rule requires covered
grains exports. After serving as the top destination for U.S. DDGS
facilities to follow current good manufacturing practices for animal
five years in a row, the Chinese market collapsed to less than 2 per-
food production and have a written food safety plan that includes an
cent of global shipments in 2018 due to the imposition of a punitive
analysis of hazards and risk-based controls. These preventive controls
tariff in effect for five years starting January 2017. Vietnam, however,
provide a formal assurance to buyers around the world that Ameri-
re-opened its doors to U.S. DDGS exports following its Dec. 2016
can ethanol co-products continue to be safe feed ingredients.
market suspension.
The Renewable Fuels Association will continue to look for ways to
open and expand markets for American ethanol co-products
in 2019.
U.S. Distillers Grains Exports Distillers Grains Production by Type, As-Is Basis
12,100 Wet Distillers
14,000 Grains, 31% Modified Wet
Thousand Metric Tons
Distillers Grains, 10%
12,000
10,000 Condensed
Distillers Solubles
Dried
8,000 (Syrup) , 3%
Distillers
6,000 Grains
w/Solubles, Dried Distillers
4,000 46% Grains, 9%
2,000
-
Source: U.S. Dept. of Agriculture
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018*
4,000
Corn Distillers Oil Production
Sources: U.S. Dept. of Commerce, U.S. Census Bureau, Foreign Trade Statistics
*2018 estimated based on Jan.-Sep. 2018 4,000
3,500
3,000
Million Pounds
2,500
2,000
1,500
1,000
500
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018*
8 RENEWABLE FUELS ASSOCIATION Source: RFA based on U.S. Dept. of Agriculture data *EstimatedTop Destinations for U.S. Distillers Grains Exports in 2018 8%
Canada
6%
Ireland
3%
South
Turkey Korea
10% Japan
10% 4%
Israel
3%
Mexico
17%
Thailand
9%
Vietnam
10%
Indonesia
6%
REST OF
WORLD
23%
Sources: U.S. Dept. of Commerce, U.S. Census Bureau, Foreign Trade Statistics *Based on Jan.-Sep. 2018
U.S. Ethanol Industry Co-product Animal Feed Output Distillers Grains Consumption by Specie
670
3,521 Poultry, 7% Other , 1%
Distillers Grains Corn Gluten Feed Corn Gluten Meal 37,094
45,000
40,000 Swine ,
15%
35,000 Beef Cattle ,
46%
Dairy Cattle ,
Thousand Metric Tons
30,000
31%
25,000
20,000
Source: Distillers grains
15,000 marketing companies
10,000
5,000
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018*
Source: RFA and U.S. Dept. of Agriculture. Note: All co-products converted to 10% moisture basis
*Estimated
2019 ETHANOL INDUSTRY OUTLOOK 9Charged Up with Ethanol
O
ctane is in high demand. To meet corporate average At the same time, supplies of petroleum-based components
fuel economy (CAFE) requirements and consumer have become constrained, as a result of increasing availability
preferences, automakers are increasingly utilizing tur- of lighter shale oils, the configuration of refineries and restric-
bocharged, higher-compression engines. To achieve performance tions on the sulfur content in fuel. An additional drawback of
and prevent engine knock, manufacturers are requiring or aromatic hydrocarbon octane sources, such as benzene, is that
recommending the use of high-octane gasoline in these engines. they are toxic and worsen air pollution.
As a result, premium gasoline sales over the last few years have
As ethanol blends have been adopted nationwide, refiners have
been at their highest levels in a decade.
optimized operations to reduce hydrocarbon octane production
The additional demand has caused the value of octane to and take advantage of the octane from ethanol. Today, most reg-
increase. While the price differential between premium and ular gasoline is produced using blendstock with an octane rating
regular gasoline has risen at wholesale, the differential in what is of 84, which is then upgraded to 87 (the minimum allowed in
charged to consumers at retail has jumped even more. most states) by adding 10% ethanol.
Even as this has occurred, the discount of ethanol to its octane The future is bright for ethanol as a source of octane. In 2018,
value has widened dramatically. Ethanol has a blending octane President Trump directed the EPA to allow year-round sales of
rating of 114, which is higher than the ratings of the main E15 (i.e., gasoline containing 15% ethanol) nationwide. Once
petroleum-based components. In 2018, even as a rebound in a final rule is in place implementing this change, E15 sales vol-
petroleum prices resulted in a blending value for ethanol that umes are expected to increase. E15 has an octane rating of 88,
was higher than that of other components, ethanol was actually giving consumers an added boost at a lower cost.
priced lower than these competing octane sources. The position
Additionally, turbocharged engines are expected to continue
of ethanol as the most competitive source of octane on the
becoming more prevalent, resulting in growing demand for
planet became more apparent than ever.
higher-octane gasoline.
10 RENEWABLE FUELS ASSOCIATIONPremium Gasoline: Share of Sales and Price Difference vs. Regular
15% 30%
Premium Share of Gasoline Sales
Premium and Regular Gasoline
14%
WHAT IS
25%
Price Difference Between
13%
12% 20%
OCTANE
11%
10% 15%
9%
8% 10% AND WHY IS IT
7%
6%
5%
IMPORTANT?
5% 0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Premium Share of Gasoline Sales Retail Price Spread: Premium vs. Regular
Wholesale Price Spread: Premium vs. Regular
Source: RFA based on U.S. Energy Information Administration data A fuel’s octane rating is the
measure of its ability to resist
“knocking” in the engine, which
Blending Octane Ratings of Various is caused when the air/fuel
Ethanol
Gasoline Octane Boosters
114 mixture detonates prematurely
120
during combustion. According
117
115
to the Department of Energy,
110
110 “Using a lower octane fuel than
107
104 required can cause the engine
Octane Rating
105
100
101
to run poorly and can damage
95
Gasoline
Blendstock
95 the engine and emissions
93
84 control system over time.
90
85
It may also void your warranty.”
80
75
70
Gasoline n-Butane Alkylate Benzene Toluene Xylene MTBE Ethanol Methanol
Blendstock
Source: Department of Energy
Octane Blending Value vs Market Price
300
250
200
Cents/Gallon
150
100
50
0
Alkylate Reformate Toluene MTBE Ethanol ETBE Naphtha
Blend Value Market Price
Source: Argus Media
2019 ETHANOL INDUSTRY OUTLOOK 11RFS Promise Waivering
S
ince it was passed in 2005 with overwhelming bipartisan Recognizing the success of the program, President Trump
support, the foundation of America’s renewable energy promised to support the RFS and assured implementation in a
policy has been the Renewable Fuels Standard (RFS). manner consistent with the law. Indeed, the Administration has
The RFS requires refiners to blend an annually increasing required the full 15-billion-gallon conventional biofuel volume,
amount of renewable fuels like ethanol. By any measure, the while also steadily increasing advanced and cellulosic biofuel
RFS has been a huge success. It has stimulated investment in requirements.
biofuels production and infrastructure, lowered gasoline prices,
However, despite the success of the RFS, or perhaps because
cut tailpipe pollution, created value-added markets for farmers,
of it, former EPA Administrator Scott Pruitt in early 2018
decreased petroleum imports, and reduced carbon emissions.
initiated a demand destruction campaign against biofuels that
devastated ethanol prices, expanded stocks of both ethanol and
RIN credits, and left the industry reeling. Pruitt let 48 oil re-
fineries out of their legal obligation to blend renewable fuels in
2016 and 2017, amounting to more than 2.25 billion gallons of
renewable fuel, or 12% of the U.S. biofuels industry’s produc-
tion capacity.
Small Refiner Exemptions Granted and Associated Fuel Volumes
Small Refiner Exemptions Granted and Associated Fuel Volumes
35 16,000
30 14,000
Average U.S. Oil Refinery Cash Operating Margins
Fuel Volume (Million Gallons)
12,000
25
Exemptions Granted
10,000
20 20
18 8,000
16
14 15
6,000
12
$/Barrel
10 10
8 4,000
6
4 5 2,000
2
0
0 0
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
Jan-16
May-16
Sep-16
Jan-17
May-17
Sep-17
Jan-18
May-18
Sep-18
2013 2014 2015 2016 2017
Gasoline and Diesel Exempted Number of Exemptions Granted
Source: Muse Stancil Source: U.S. Environmental Protection Agency
12 RENEWABLE FUELS ASSOCIATIONPruitt’s actions came just as ethanol was breaking through the
so-called “blend wall,” having hit a record 10.75% blend rate in
January. As the marketplace realized the extent of the refinery
exemptions, the blend rate fell to a five-year low of 9.5% in
“We have a statutory volume of
April and averaged well below 10% throughout the rest of the 15 billion gallons, and those waivers
year. To maintain markets, ethanol prices were forced to adjust,
falling to a 13-year low. Ethanol RIN credit prices fell from
reduce that gallon for gallon.
around $0.90 in November 2017 to less than $0.10 in Novem- That’s demand destruction.”
ber 2018. Those suggesting there has been no impact on ethanol
from the small refiner waivers are ignoring reality. USDA Secretary Sonny Perdue
Still, with RIN prices at near-record lows, refinery profits
skyrocketing, a new Administrator at EPA, and a president
remaining steadfast in his support of the RFS, there is reason to
be optimistic that Pruitt’s demand destruction policies will end,
and the RFS will once again drive economic opportunities for
rural America.
Average Weekly
Average Ethanol
Weekly (D6)
Ethanol (D6)RIN
RINPrice
Price U.S. Net Farm Income
140
$140
120
$120
100
$100
80
$80
Billion $
Cents/RIN
60 $60
40 $40
20 $20
10
$0
2010 2011 2012 2013 2014 2015 2016 2017 2018F
Oct-12
Oct-13
Oct-14
Oct-15
Oct-16
Oct-17
Oct-18
Apr-12
Apr-13
Apr-14
Apr-15
Apr-16
Apr-17
Apr-18
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
Source: U.S. Dept. of Agriculture
Source: OPIS
2019 ETHANOL INDUSTRY OUTLOOK 13Empowering E15
T
he inexorable march toward higher ethanol blends made But the biggest E15 news came on October 9, when President
great strides in 2018, as both marketplace and federal Donald Trump announced he would direct EPA to initiate a
policy initiatives pushed E15 toward a tipping point, rulemaking allowing the year-round use of E15. To this point,
where consumers are empowered to choose the higher octane E15 has been severely restricted by EPA’s disparate application
lower priced fuel in every state and at all times of the year. of fuel volatility regulations impacting ethanol fuels. With the
president’s directive, EPA will extend the same volatility waiver
A combination of federal and state infrastructure programs and
currently available only to E10 blends in the summer months
funding from the industry-sponsored Prime the Pump initia-
to E15 as well. That will allow E15 to be sold year-round
tive helped increase the number of stations offering E15 at the
and greatly expand market opportunities for the higher
pump by a third last year, to approximately 1,575 stations across
ethanol blend.
some 30 states. E15 sales are forecast to be 280 million gallons
in 2018, the ethanol content of which would be 42 million If implemented as the president directed, E15 sales could grow
gallons. E15 is also increasingly being made available at the significantly next year, perhaps approaching 800 million gallons,
terminal, with companies like Growmark Energy now offering utilizing 120 million gallons of ethanol. This represents an
blended E15 at their terminals across the Midwest. increase of 40 million gallons over the amount of ethanol that
would be contained in an equivalent volume of E10. Of course,
EPA allows the use of E15 in all passenger vehicles 2001 and
over time, as consumers seek out a higher octane, lower priced
newer. But the number of vehicles with expressed warranty
fuel for the vehicles, the growth potential for ethanol will grow
coverage for E15 continues to grow as well. Last year, Suba-
exponentially.
ru joined most other auto companies in extending warranty
coverage to E15 in its most popular vehicles. Indeed, more than
93 percent of 2019 model year (MY) vehicles are explicitly ap-
proved by the manufacturer to use E15, according to the results
U.S. Retail Stations Offering E15
of an annual RFA analysis of warranty statements and owner’s 1,575
manuals.
1,600
1,400
1,200
1,000
800
600
400
In the six years since E15 was formally approved for use 200
by EPA, American drivers have logged over 5 billion -
miles on the fuel without a single reported case of 2012 2013 2014 2015 2016 2017 2018
"engine damage," misfueling, or inferior performance. Source: RFA
14 RENEWABLE FUELS ASSOCIATION“We’re going to go to 12 months, which
makes a lot of farmers very happy —
because we go from 8 months to 12
months, that’s a big difference. That was
always unnecessary and ridiculous.”
President Donald Trump
MODEL YEAR U.S. Market
2012 2013 2014 2015 2016 2017 2018 2019 Share*
BMW Group
BMW 1.8%
Mini 1
0.3%
Daimler Group (Mercedes-Benz) 2.1%
FCA (Chrysler, Dodge, Fiat, Jeep, Ram) 12.4%
Ford Motor Co. (Ford, Lincoln) 14.5%
General Motor Co. (Buick, Cadillac, Chevrolet, GMC) 17.4%
Honda Motor Co. (Honda, Acura) 8.8%
Hyundai Motor Co. (Hyundai, Kia) 6.7%
Mazda Motor Corp. 2.0%
Mitsubishi Motors Corp. 0.9%
Nissan Motor Co. (Nissan2, Infiniti3) 10.1%
Subaru 3.6%
Tata Motors (Jaguar, Land Rover) 0.7%
Toyota Motor Company
Lexus
13.2%
Toyota
Volkswagen Group
Audi 1.2%
Porsche 0.3%
Volkswagen 2.0%
Volvo Car Group 0.5%
All Others 0.5%
E15 Approved by Automaker in ALL Models
E15 Approved by Automaker in SOME Models
E15 Approved by EPA ONLY; Not Approved by Automaker
* Motor Intelligence (Jan.-Apr. 2018)
1 Approved the use of up to 25% ethanol blends
2 Approved the use of E15 for all models except Infiniti Frontier
3 Approved the use of E15 for all models except Nissan Armada
2019 ETHANOL INDUSTRY OUTLOOK 15Flexing Muscle
F
lex fuels like E85 enjoyed another strong year of growth
in number of stations and gallons sold. This success was
thanks to incentive programs, low carbon fuel standards
and champions in the fuel retailer world. Hundreds of millions
of gallons of E85 were sold across 2,478 cities in the country.
Unfortunately, not all of the news was positive. The number
of flex fuel vehicles (FFVs) remained unchanged from last year
given the overall reduction in flex fuel vehicle production from
What are FLEX FUELS?
automakers. This is already catching the attention of some fuel
Flex fuels are gasoline-ethanol blends containing be-
retailers. Still, others see great promise for many years to come
tween 51-83 percent ethanol (excluding denaturant).
in a growing fuel market. Moreover, other flex fuel blends like
E30 are growing rapidly as consumers realize what appears to Flex fuels are intended for use in flex fuel vehicles
be the optimal blend level for ethanol, maximizing performance (FFVs) only. Historically, flex fuels had been commonly
and emissions reduction. referred to as "E85" because prior to 2012, the fuels
This growing market for flex fuels is also beginning to be seen were limited to 70-85 percent denatured ethanol
in unconventional markets like the tuner and off-road sectors. and E85 was the most popular blend. Today, the
They have found E85 for the power, and the overall savings at actual amount of ethanol in the flex fuel depends
the pump by utilizing simple conversion technologies available on economics, time of year and fuel specifications.
in the marketplace today.
National Average Retail Prices for E10 and E85
$3.10
$2.90
$2.70
$2.50
$2.30
$2.10
$1.90
$1.70
$1.50
Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18
E10 E85
Source: E85prices.com
16 RENEWABLE FUELS ASSOCIATIONCan you Flex Fuel?
The following model year 2019 vehicles are available as Flex Fuel Vehicles (FFVs):
Chrysler 300 (3.6L) Ford E-Series (6.2L) GMC Yukon (5.3L)
Chevrolet Express (6.0L) Ford Escape (2.5L) GMC Yukon XL (5.3L)
Chevrolet Express (6.0L) Ford Explorer (3.5L) Jeep Cherokee (2.4L)
Chevrolet Impala (3.6L) Ford F-150 (3.5L, 5.0L) Jeep Renegade (2.4L)
Chevrolet Silverado (5.3L) Ford F-Series Super Duty (6.2L) Mercedes-Benz CLA250 (2.0L)
Chevrolet Silverado HD (6.0L) Ford Police Interceptor (3.5L, 3.7L) Mercedes-Benz GLA250 (2.0L)
Chevrolet Suburban (5.3L) Ford Taurus (3.5L) Mercedes-Benz GLE350 (3.5L)
Chevrolet Tahoe (5.3L) Ford Transit Connect (2.0L) Nissan Frontier (4.0L)
Dodge Charger (3.6L) Ford Transit T150 (3.7L) Toyota Tundra (5.7L)
Dodge Grand Caravan (3.6L) GMC Savana (6.0L)
Dodge Journey (3.6L) GMC Sierra (5.3L)
Dodge Ram 1500 (3.6L) GMC Sierra HD (6.0L)
U.S. Retail Stations Offering E85 and Other Flex Fuels
4,500
5, 000
4, 500
4, 000
Number of Stations
3, 500 3,316
3, 000 2,674
2, 500
2,078
2, 000
1, 500
1, 000 762
500 188
113
0
2000 2003 2006 2009 2012 2015 2018
Source: RFA and U.S. Dept. of Energy Sources: RFA and U.S. Dept. of Energy
2019 ETHANOL INDUSTRY OUTLOOK 17Re-Fueling Knowledge
R
FA launched a “Fuel Your Knowledge” campaign in The Fuel Your Knowledge campaign included RFA’s sponsor-
2018 to correct misinformation and provide up to date, ship of the Crappie Masters National Tournament Trail, putting
informed material about the effects of ethanol on motor ethanol in the spotlight for anglers across the country. Crappie
cycles, boats, and small engines. Masters hosts 18 tournaments across 9 states, from Florida,
to Texas, to Illinois. The events are televised and covered by
countless angler and boating publications. The message of this
effort was unambiguous – E10 is safe for your boat and the
environment; and provides increased performance at lower cost.
18 RENEWABLE FUELS ASSOCIATIONThe use of the new motorcycle did not stop there. For the tenth
straight year, RFA returned to the Black Hills of South Dakota
for the Sturgis Motorcycle Rally and promoted ethanol to over
500,000 bikers. The custom E85 motorcycle built by Paul Jr.
participated in the Legends Ride and was on display all week
during other RFA promotions. The RFA motorcycle has since
participated in countless events and promotions across the
country.
RFA also took the E10 compatibility story to the motorcycle
community. RFA worked with the Discovery Channel’s
American Chopper and Paul Teutel, Jr. to build a custom E85
chopper. The show highlighted ethanol’s impact to the econ-
omy and the environment and Paul Jr. even toured an ethanol
plant, expressing support for the benefits of ethanol for both
cyclists and farmers. The show was broadcasted to over 200
countries in over 90 languages and is still being played
globally today.
2019 ETHANOL INDUSTRY OUTLOOK 19Value-added Processing
T
he production of ethanol is among man’s earliest In DRY MILLING, the entire grain kernel is first ground into
ventures into value-added processing. Henry Ford and “meal,” then slurried with water to form a “mash.” Enzymes
Alexander Graham Bell were among the first to recog- are added to the mash to convert starch to sugar. The mash
nize that the plentiful sugars found in plants could be easily and is cooked, then cooled and transferred to fermenters. Yeast
inexpensively converted into clean-burning, renewable fuel. is added and the conversion of sugar to alcohol begins.
After fermentation, the resulting “beer” is separated from
While the production concept remains the same, today’s ethanol
the remaining “stillage.” The ethanol is then distilled and
industry uses state-of-the-art technologies to produce high-
dehydrated, then blended with about 2% denaturant (such as
octane ethanol and valuable co-products from the starches and
gasoline) to render it undrinkable. It is then ready for shipment.
sugars found in grains, beverage and food waste, and cellulosic
The stillage is sent through a centrifuge that separates the
biomass.
solids from the solubles. These co-products eventually become
More than 90% of the U.S. fuel ethanol is produced using the distillers grains, as well as corn distillers oil.
dry mill process, with the remaining 9% coming from wet mills.
In WET MILLING, the grain is first separated into its basic
The main difference between the two processes is in the initial
components through soaking. After steeping, the slurry is
treatment of the grain.
processed through grinders to separate the corn germ. The
remaining fiber, gluten and starch components are further
segregated. The gluten component (protein) is filtered and dried
to produce animal feed. The remaining starch can then be
fermented into ethanol, using a process like the dry mill process.
On average, 1 bushel of corn
(56 pounds) processed by a dry
mill ethanol biorefinery produces:
• 2.86 gallons of denatured fuel
ethanol
• 15.9 pounds of distillers grains
animal feed (10% moisture)
• 0.75 pounds of corn distillers oil
• 16.5 pounds of biogenic carbon
dioxide U.S. Fuel Ethanol Production by Technology Type
Wet
Mill
8.9%
In 2018, ethanol biorefineries captured more than
2.8 million tons of CO2, which was used for bottling,
Dry Mill
food processing, dry ice production and other uses. 91.1%
Source: RFA based on data from U.S. Dept. of Agriculture
Source: RFA based on data from U.S. Dept. of Agriculture
20 RENEWABLE FUELS ASSOCIATIONDry Mill Ethanol Process
Grain Receiving and Storage Milling Cooking Liquefaction Fermentation
Dried Distillers Grains Dryer Bottling,
Dry Ice and
Other Uses
Distillers
Grains to
Livestock
and Poultry
Syrup Tank Evaporator Liquids
Distillers Centrifuge
Grains to Corn Distillers Oil
Market
Distillation
Feed
Biodiesel
Wet Distillers Grains
Solids
Denaturant
Ethanol to Market Ethanol Storage
Ethanol-Blended Molecular Sieve
Gasoline
to Consumer
Source: RFA
U.S. Ethanol Production Capacity by Feedstock Type
Corn Starch
Corn/Sorghum/Cellulosic Bomass 2.9%
94.3%
Corn/Sorghum 2.1%
Cellulosic Biomass 0.5%
Food/Beverage Waste 0.2%
Source: RFA
2019 ETHANOL INDUSTRY OUTLOOK 21Technology Powers Innovation
B
ecause of improvements in production efficiencies and Cellulosic ethanol presents an exciting and tangible economic
the use of “new” feedstocks, today’s ethanol biorefinery opportunity for ethanol producers, as the fuel’s greater
operates much like a chemical refinery, able to produce greenhouse gas (GHG) reductions result in a price premium
multiple renewable fuels and products. Some biorefineries are under the California Low Carbon Fuel Standard (LCFS) and
producing biodiesel and renewable diesel from corn distillers oil, the federal Renewable Fuel Standard (RFS). However, the U.S.
but the largest impact has been in corn kernel fiber production. Environmental Protection Agency (EPA) must act to address
questions pertaining to corn kernel fiber D3 eligibility under
The addition of “bolt-on” technologies has allowed producers
the RFS. Producers are ready and able to produce corn fiber
to expand yields by processing ethanol from corn fiber, a
ethanol and are growing increasingly frustrated by the slow
cellulosic portion of the grain. New corn fiber technology
progress to approve pathways and registrations at EPA.
allows a greater portion of the corn kernel – the fiber - to be
converted to ethanol, allowing biorefineries to increase yields Importantly, reforms to the 45Q carbon capture credit as part
while producing both cellulosic ethanol and starch ethanol of the 2017 tax reform bill have made the economics for carbon
from the same feedstock. Unleashing corn kernel fiber ethanol capture storage more favorable, as well as for the delivery of
production could result in existing ethanol plants producing carbon dioxide for enhanced oil recovery efforts, which could
hundreds of millions of gallons of cellulosic ethanol from this drive the development of carbon dioxide pipelines. The credit
single stream of agricultural residue in the near term. will also help producers meet requirements for low carbon fuels,
such as California’s LCFS market.
Octane Rating
22 RENEWABLE FUELS ASSOCIATIONBIOFUELS
REDUCING
CARBON
.
To date, ethanol is responsible for 45% of
the total greenhouse gas reduction occur-
ring under the LCFS program. Between
2011-2017, 10.6 billion gallons of ethanol
were consumed in California, resulting in
15.5 million metric tons of CO2 reduction.
96% of the ethanol used was produced
from corn and sorghum. Amendments to
the LCFS scheduled to go into effect Jan-
uary 1, 2019, will result in further reduc-
Quad County Corn Processors, Galva, Iowa. QCCP was the first plant in the country to tions in carbon intensity for corn ethanol
commercially produce ethanol from cellulose.
pathways. The amendments recognize
further carbon reductions from lower corn
farming and fertilizer emissions, lower
electricity emissions, and an increased
Total D3 RINs Generated soybean meal displacement credit for
dried distillers grains with solubles.
250,000,000
200,000,000
California LCFS Credit Percentage
by Fuel Q1 2011 - Q2 2018
150,000,000
3%
100,000,000
7%
50,000,000 9%
41%
- 16%
2013 2014 2015 2016 2017 2018
24%
Cellulosic Ethanol
Renewable Compressed Natural Gas
Ethanol
Cellulosic Renewable Gasoline Blendstock Renewable Diesel
Biodiesel
Renewable Liquefied Natural Gas Electricity
Biomethane
Source: U.S. Environmental Protection Agency and RFA Other
Source: California Air Resources Board (CARB) and RFA
2019 ETHANOL INDUSTRY OUTLOOK 23Powering Energy Dominance
E
nergy security remains a significant concern for the U.S.,
but thanks in part to homegrown ethanol, Americans are
importing less petroleum, helping the nation rein in oil “The American energy renaissance is pressing forward with
imports for the transportation sector. On a net basis, U.S. depen- stunning speed…. American energy dominance means the
dence on imported crude oil and petroleum products fell to just end of our crippling dependence on foreign energy, and
14 percent in 2018, due in part to booming domestic production.
that our industries have access to reliable, affordable, and
However, without the addition of 16.1 billion gallons of ethanol
diverse energy supplies that enable them to compete in the
to the domestic fuel supply, U.S. import dependence would have
global marketplace. Increasing energy security is also
been 20 percent. In other words, without ethanol’s contribution,
ushering in a new era of American leadership around the
it would have taken an additional 594 million barrels of imported
world as we export more of our energy bounty to friends
crude oil to meet America’s petroleum needs!
and allies abroad, freeing them from hostile dependence.”
While progress has been made to boost U.S. energy security, more
needs to be done. The nation still transfers a significant amount
President Trump in his Presidential Proclamation on
of money to the OPEC cartel. In 2018, the U.S. sent a collec-
National Energy Awareness Month, Sept. 28, 2018
tive $54 billion, or $425 per household, to countries like Saudi
Arabia, Iraq, Venezuela and Nigeria to OPEC to pay for crude
oil imports. Energy security is one of the main drivers behind the
Renewable Fuel Standard and why it remains critical the program
stays in place and grows over time, providing consumers with
more choices at the pump and shoring up domestic energy usage.
U.S. Petroleum Net Import Dependence
with and without Ethanol
70%
61%
60% 54%
58%
50% 53% 45%
40%
20%
40%
30% 14%
20%
10%
2018*
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Actual Import Dependence Import Dependence Without Ethanol
On a net basis (i.e., after accounting for U.S. exports), the United States relied
on imports to meet 14% of its petroleum demand in 2018. Without the
contribution of 16.1 billion gallons of ethanol, U.S. import dependence would
have been equivalent to 20% of petroleum demand.
Source: RFA based on U.S. Dept. of Energy data *Estimated
24 RENEWABLE FUELS ASSOCIATIONU.S. Crude Oil Production and Imports
351,711
360,000
340,000
320,000
300,000
Thousand Barrels
248,002
280,000
260,000
240,000
220,000
200,000
180,000
Apr-2016
Jul-2016
Oct-2016
Jan-2017
Apr-2017
Jul-2017
Oct-2017
Jan-2018
Apr-2018
Jul-2018
Oct-2018
Jan-2013
Apr-2013
Jul-2013
Oct-2013
Jan-2014
Apr-2014
Jul-2014
Oct-2014
Jan-2015
Apr-2015
Jul-2015
Oct-2015
Jan-2016
U.S. Crude Oil Production U.S. Crude Oil Imports (Gross)
While U.S. crude oil production has increased to over 350
million barrels per month, our nation still imports about 240
million barrels per month on a gross basis.
Source: U.S. Dept. of Energy Transferring American
Wealth to OPEC
Even though U.S. oil production has increased
in recent years, our nation’s economy still
transfers tens of billions of dollars every year
to the OPEC cartel. In 2018 alone, the U.S.
sent some $54 billion--roughly $425 per
American household--to OPEC nations to pay
for crude oil imports.
U.S. Spending on
OPEC Nation Crude Oil Imports
(Billion $)
Historic Oil Import Displacement by Ethanol
Saudi Arabia $15.4
594 Iraq $12.9
700
Venezuela $9.6
Million Barrels of Oil Displaced
582
600 540
564 Nigeria $4.3
508 522
485 484 485 Ecuador $3.9
500
399 Angola $2.4
400
330 Kuwait $1.9
300 Algeria $1.3
231
Libya $1.6
200
Other OPEC $0.6
100 TOTAL $53.9
-
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018* RFA based on U.S. Dept. of Energy data
Source: RFA based on U.S. Dept. of Energy data *Estimated
2019 ETHANOL INDUSTRY OUTLOOK 25Empowering Consumers
T
he debunked “food vs. fuel” myth drifted another year Yet, financial conditions remained tenuous for crop producers.
farther into the rearview mirror in 2018. In the U.S., Trade tensions affected crop exports, with soybeans particularly
farmers harvested the second-largest corn crop ever and affected. Demand for ethanol was affected by trade actions as
shattered the previous record for soybean production. well, along with large-scale grants to refineries of exemptions
from the RFS, which contributed to weak production levels in
the fourth quarter and thereby affected corn demand. Globally,
World Oil Prices Drive Global Food Prices crop inventories remained ample.
As crop prices languished, the share of each dollar U.S. consum-
World Food Price Index Brent Crude Oil Price ($/Barrel)
ers spend on food that goes to pay for farm products receded
250
further to 15% in 2018.
225
200 Meanwhile, the U.S. animal protein sector continued the strong
Brent Crude Oil Price ($/Barrel)
expansion it has experienced over the last few years. Production
UN FAO Food Price (Index)
175
150 of meat and poultry, other than beef, has expanded relatively
125 steadily over the long term, other than a correction during the
100 2009 financial crisis (following a surge in 2008). After stagnat-
75 ing for a number of years, beef production also began expanding
50 in 2016 Such growth is facilitated not only by ample supplies
25 of grains and oilseed meals, but also by the availability of
0 high-quality feed co-products from the ethanol industry.
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Source: United Nations Food & Agriculture Org. and U.S. Dept. of Energy
What Does $1 Spent on Food Really Pay for? Average Annual Food Inflation Rates by Decade
Farm
Transportation, Energy, Labor, Packaging, Advertising, Etc.
Ingredients
9%
7.8%
Year-On-Year Food Inflation
8%
7%
6%
5% 4.6%
4% 1.7%
2.8% 2.9%
3%
2%
1%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0%
1970s 1980s 1990s 2000s 2010s
15% 85%
Source: U.S. Bureau of Labor Statistics
Source: U.S. Dept. of Agriculture
26 RENEWABLE FUELS ASSOCIATIONMeanwhile, retail food price inflation rates continued to be sub-
dued. U.S. food prices were just 1 percent higher in 2018 than
in 2017, lower than the “headline” inflation rate for the overall
economy. Annual average food price inflation has averaged just
2.2 percent since 2005 when the RFS was enacted, a significant
deceleration from prior decades.
Globally, the world food price index maintained by the Food
and Agriculture Organization of the United Nations was on
track to finish 2018 as the second lowest level since 2009.
Due to the remarkable productivity of farmers in the U.S. and
globally, consumers are able to purchase both food and fuel at
reasonable prices, while reducing greenhouse gas emissions.
U.S. Food Price Inflation and Ethanol Production
9% 18,000
Year-On-Year Food Inflation
8% 16,000
7% 14,000
Million Gallons
6% 12,000
5% 10,000
4% 8,000
3% 6,000
2% 4,000
1% 2,000
0% -
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"$),
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
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)/('
Year-Over-Year Inflation Rate (Left Axis) Ethanol Production (Right Axis) Inflation Rate Trend
Source: U.S. Bureau of Labor Statistics and RFA *Estimated
2019 ETHANOL INDUSTRY OUTLOOK 27Clearing the Air
S
ince the signature of the Clean Air Act Amendments by Recently, this has allowed the ethanol industry to contribute
President George H.W. Bush in 1990, ethanol has been extensively to meeting California’s Low Carbon Fuel Standard
used to reduce carbon monoxide emissions from vehicles, (LCFS). The estimated carbon intensity of starch-based ethanol
with considerable success. The use of ethanol also has contributed used toward the LCFS has declined by 21% since implementa-
to the reduction of other criteria pollutants, such as nitrogen tion in 2011.
oxides and fine particulate matter.
Moreover, according to the U.S. Departments of Energy and Ag-
The expansion of ethanol usage following the establishment of riculture, corn ethanol from a typical dry mill has 40-45 percent
the Renewable Fuel Standard (RFS) in the mid-2000s resulted in lower GHG emissions than gasoline. This includes theoretical
further declines in emissions of these pollutants. emissions from land-use change, even though the EPA estimates
that agricultural land use in the United States has declined since
At the same time, ethanol production efficiency has continued to
legislation establishing the current version of the RFS was enact-
improve, and greenhouse gas (GHG) emissions reductions associ-
ed in 2007.
ated with ethanol compared to gasoline have continued to grow.
Plants that are ultimately made into biofuels absorb carbon
dioxide from the atmosphere as they grow, and that same amount
of carbon dioxide is re-released when the biofuel is produced and
combusted in an engine. In this way, ethanol and other biofuels
simply recycle atmospheric carbon.
By displacing hydrocarbon substances like aromatics in gasoline,
ethanol helps reduce emissions of air toxics, along with partic-
ulate matter, carbon monoxide, nitrogen oxides and exhaust
hydrocarbons. These pollutants cause smog and ground-level
Carbon ozone and adversely affect human health.
dioxide
absorbed Cutting these emissions results in lower incidence of respiratory
by biomass illness and asthma, heart disease, lung disease and cancer – and
crops
ultimately fewer premature deaths.
Carbon
Biofuels Carbon The use of ethanol in gasoline in 2018 reduced
Carbon
in biomass
dioxide
released as
converted CO2-equivalent greenhouse gas emissions from the
to liquid
Cycle
fuel burns transportation sector by 55.1 million metric tons.
biofuel
That’s equivalent to removing 11.7 million cars from
the road for an entire year, or eliminating the annual
Liquid emissions from 13 coal-fired power plants.
biofuel
combusted Source: RFA analysis using U.S. Dept. of Energy GREET model
to power
vehicle
28 RENEWABLE FUELS ASSOCIATIONEmissions from All Highway Vehicles
120,000 1,000
900
100,000
CO & NOx (000 Tons)
800
80,000 700
PM (000 Tons)
600
60,000 500
400
40,000 300
U.S. EPA Determination of Agricultural Land Use vs. 2007 Baseline 20,000
200
100
0 0
405
1990
2008
2017
400
Carbon Monoxide (CO)
395 Nitrogen Oxide (NOx)
Particulate Matter (PM2.5)
390
385
Carbon Monoxide
Million Acres
380 40,000
30,000
375
000 Tons
20,000
370
10,000
365 0
2008 2011 2014
360
On-Road, Non-Diesel LDVs
Other Highway Vehicles
355
350 Nitrogen Oxides
2007 2010 2011 2012 2013 2014 2015 2016 2017 2018
8,000
Source: RFA using U.S. Environmental Protection Agency data
6,000
000 Tons
4,000
Carbon Intensity of Starch-based Ethanol in California Gasoline 2,000
90 0
2008 2011 2014
85
On-Road, Non-Diesel LDVs
Carbon Intensity (gCO2e/MJ)
80 Other Highway Vehicles
75
70 Particulate Matter 2.5, Primary
300
65 250
200
60
000 Tons
150
55 100
50
50 0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2008 2011 2014
2011 2012 2013 2014 2015 2016 2017 2018
On-Road, Non-Diesel LDVs
Source: RFA using CARB data Other Highway Vehicles
Note: LDVs=light duty vehicles
Source: RFA using CARB and EPA data
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